Cities, towns get pinched in state's unemployment payback

Published: Sunday, March 31, 2013 at 02:48 PM.

Though it seems small, Maness pointed out that sum represents “about a half-cent on the city’s tax rate”, which is 44 cents per $100 of property valuation.

In addition to being “forced to spend” these unemployment taxes, Maness also dropped a bit of a bomb when he informed council members that part-time summer help can sometimes file for unemployment when they are released from service.

“Even if they quit,” he said to the amazed council members, “they can sometimes file.”

Graham Mayor Jerry Peterman simply uttered, “That’s ridiculous.”

Reece said to cover the new expense, Burlington will have to “tighten our belts” and reduce expenses somewhere.

It’s a small number on the upcoming budget in Graham, but multiplied by thousands of other cities and towns across the state it should add up to a goodly sum streaming out of the counties and into the state’s coffers.

Graham City Manager Frankie Maness told the council in a budget retreat last week that he will be forced to add expenditures the city must pay into the state’s unemployment insurance system signed into law last month by Gov. Pat McCrory.

The new law, reforming the state’s unemployment system, allows the state to accelerate its repayment of its estimated $2.5 billion debt to the federal government. It does this by making a number of changes to the system, including raising unemployment taxes for businesses and limiting the amount and duration of benefits received by unemployment insurance claimants, according to a memo from Karl Knapp, the director of research and policy analysis for the N.C. League of Municipalities.

The major change affecting municipalities requires local governments to maintain a reserve of funds equaling 1 percent of unemployment insurance taxable wages.

“OUR PAYROLL is between $6 and $7 million,” said Mike Apple, finance officer for the city of Mebane. He said 1 percent of that amount is $60,000, but he said, “It won’t be that. It’ll be some fraction of that.”

The municipalities will make quarterly payments during the fiscal year (July 1, 2013 to June 3, 2014) in order to build their reserves.

“The state charges, this year, 1 percent of the first $20,900 that each employee makes,” said Peggy Reece, director of finance and risk management for the city of Burlington.

“That’s $209 per employee,” she said. “They’re saying our reserve has to equal that amount per employee.”

For Burlington, that means setting aside about $170,000 from the city’s general and water and sewer funds, since that’s where most of Burlington’s employees work, said Reece. Mebane hasn’t really crunched the numbers yet, but Apple said, “We’ll come up with some number to include in the budget.”

IN GRAHAM, Maness explained the city now does not pay unemployment insurance until claims are made and paid. Apple explained businesses pay a tax that goes into a fund that pays for unemployment, while municipalities have thus far been on a “reimbursement basis” with the state.

Maness said Graham hires about 220 full- and part-time employees. The costs of covering each employee will vary, but not exceed $214 per employee per month. If all employees were covered by the top rate, the amount would cost Graham $47,080.

Though it seems small, Maness pointed out that sum represents “about a half-cent on the city’s tax rate”, which is 44 cents per $100 of property valuation.

In addition to being “forced to spend” these unemployment taxes, Maness also dropped a bit of a bomb when he informed council members that part-time summer help can sometimes file for unemployment when they are released from service.

“Even if they quit,” he said to the amazed council members, “they can sometimes file.”

Graham Mayor Jerry Peterman simply uttered, “That’s ridiculous.”

Reece said to cover the new expense, Burlington will have to “tighten our belts” and reduce expenses somewhere.